Rothschild has been cleared of allegations of breaking Takeover Panel rules,
following a complaint from engineering group Charter.

In the latest acrimonious twist in the testy £1.5bn three-month bid battle for the company, The Telegraph understands that Charter complained to the Panel about alleged inside information to which Rothschild had access.

The blue-blooded investment bank, which advised Melrose on its bid, also gave advice to Charter from September to December 2010. The engineering group is also believed to have had further contact with Rothschild in the Spring of this year on an unknown project.

Charter's board, led by chairman Lars Emilson, became concerned when, following Melrose's hostile approach at the end of June, it emerged that Rothschild was working for the listed turnaround specialist. It is not known exactly at what point in the summer the complaint was made.

Sources close to Rothschild deny the bank received any fees from Charter or that it had any confidential information that could lead to a conflict.

However, the situation again raises the question of so-called "Chinese walls" in advisory banks, and the way in which a small number of top-tier houses win the majority of advisory work.

Sources close to the Takeover Panel said: "If a complaint of this kind was made then a decision would be reached extremely quickly and if the complaint had any merit the advisor concerned would be required to stand down straight away."

The bidding war for Charter ended on Tuesday after Melrose walked away from its potential 850p-a-share approach, leaving US rival Colfax's 910p-a-share bid as the only offer on the table.

The news adds to the increasingly bitter spat between Charter and Melrose, spurred by some of Charter's shareholders, including Schroders and Aviva, which vocally supported the Melrose tie-up.

It is believed Melrose executive chairman Christopher Miller only attempted to engage with Mr Emilson on three occasions during the three-month bid process, each by telephone, and each very brief.

On the first such call, Mr Miller is thought to have simply told the Charter chairman that he should be prepared for a 780p-a-share bid proposal - its initial approach - before ringing off. So poor were the relations between the pair that Mr Miller did not call Mr Emilson on Tuesday afternoon to let Charter know Melrose was pulling out of the running.

A Charter spokesman said: "Charter has no issues with Rothschild's advisory relationship with Melrose".